Important information about Multiple Choice Accounting Questions

1. Wriglee, Inc. went to court this year and successfully defended its patent from infringement by a competitor. The cost of this defense should be charged to
patents and amortized over the legal life of the patent.
legal fees and amortized over 5 years or less.
expenses of the period.
patents and amortized over the remaining useful life of the patent.

2. A loss on impairment of an intangible asset is the difference between the asset's carrying amount and the expected future net cash flows.
carrying amount and its fair value.
fair value and the expected future net cash flows.
book value and its fair value.

3.
The general ledger of Waner Corporation as of December 31, 2004, includes the following accounts:
Copyrights $ 40,000
Deposits with advertising agency (will be used to promote goodwill) 27,000
Discount on bonds payable 67,500
Excess of cost over fair value of identifiable net assets of
acquired 490,000
Trademarks 90,000
In the preparation of Waner's balance sheet as of December 31, 2004, what should be reported as total intangible assets?
$714,500.
$647,000.
$620,000.
$580,000.

4. Costs incurred internally to create intangibles are
capitalized.

capitalized if they have an indefinite life.

expensed as incurred.

expensed only if they have a limited life.

5.
Which of the following methods of amortization is normally used for intangible assets?

Sum-of-the-years'-digits

Straight-line

Units of production
Double-declining-balance

6.
The cost of purchasing patent rights for a product that might otherwise have seriously competed with one of the purchaser's patented products should be

charged off in the current period.

amortized over the legal life of the purchased patent.

added to factory overhead and allocated to production of the purchaser's product.

amortized over the remaining estimated life of the original patent covering the product whose market would have been impaired by competition from the newly patented product.

7.
Riser Corporation was granted a patent on a product on January 1, 1995. To protect its patent, the corporation purchased on January 1, 2004 a patent on a competing product which was originally issued on January 10, 2000. Because of its unique plant, Riser Corporation does not feel the competing patent can be used in producing a product. The cost of the competing patent should be

amortized over a maximum period of 20 years.

amortized over a maximum period of 16 years.
amortized over a maximum period of 11 years.
expensed in 2004.

8.
When a patent is amortized, the credit is usually made to

the Patent account.

an Accumulated Amortization account.

a Deferred Credit account.

an expense account.

9.
If a company constructs a laboratory building to be used as a research and development facility, the cost of the laboratory building is matched against earnings as

research and development expense in the period(s) of construction.

depreciation deducted as part of research and development costs.

depreciation or immediate write-off depending on company policy.

an expense at such time as productive research and development has been obtained from the facility.

10.
In January, 1999, Sanford Corporation purchased a patent for a new consumer product for $1,200,000. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. During 2004 the product was permanently removed from the market under governmental order because of a potential health hazard present in the product. What amount should Sanford charge to expense during 2004, assuming amortization is recorded at the end of each year?

$800,000
$600,000
$120,000
$80,000

11.
Gomez Corp. incurred $350,000 of research and development costs to develop a product for which a patent was granted on January 2, 1999. Legal fees and other costs associated with registration of the patent totaled $100,000. On March 31, 2004, Gomez paid $150,000 for legal fees in a successful defense of the patent. The total amount capitalized for the patent through March 31, 2004 should be

$250,000.
$450,000.
$500,000.
$600,000.

12.
On May 5, 2004, Pitts Corp. exchanged 6,000 shares of its $25 par value treasury common stock for a patent owned by Denson Co. The treasury shares were acquired in 2003 for $135,000. At May 5, 2004, Pitts' common stock was quoted at $32 per share, and the patent had a carrying value of $165,000 on Denson's books. Pitts should record the patent at

$135,000.
$150,000.
$165,000.
$192,000.

13.
Which of the following costs should be excluded from research and development expense?

Modification of the design of a product

Acquisition of R & D equipment for use on a current project only
Cost of marketing research for a new product
Engineering activity required to advance the design of a product to the manufacturing stage

14.
January 2, 2001, Koll, Inc. purchased a patent for a new consumer product for $270,000. At the time of purchase, the patent was valid for 15 years; however, the patent's useful life was estimated to be only 10 years due to the competitive nature of the product. On December 31, 2004, the product was permanently withdrawn from sale under governmental order because of a potential health hazard in the product. What amount should Koll charge against income during 2004, assuming amortization is recorded at the end of each year?

$27,000.
$162,000.
$189,000.
$216,000.

15.
On January 1, 2000, Watts Company purchased a copyright for $600,000, having an estimated useful life of 16 years. In January 2004, Watts paid $90,000 for legal fees in a successful defense of the copyright. Copyright amortization expense for the year ended December 31, 2004, should be
$0.
$37,500.
$43,125.
$45,000.

Solution Summary

This solution is comprised of answer for multiple choice accounting questions.